China's biggest aluminum company recorded its largest single- day percentage drop since April 14 on fears the move may hurt profits at Chalco, analysts said, but add profits of 1,400 yuan (HK$1,574) per tonne to smelters who purchase alumina at the new price.

"We want to release some stocks," one Chalco source said without giving a number. "The move was also to follow market prices."

Chalco was offering spot alumina at 3,500 yuan a tonne versus 4,200 yuan on Monday. It raised alumina prices 10.5 percent to 4,200 yuan in mid-December.

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Daiwa Securities' Geoffrey Cheng estimated the price cut would reduce Chalco revenue by 350 million yuan, based on sales of 1 million tonnes this year, and that it would affect six months' income.

"If there is no impact on costs, then all goes to profit. The profit loss would be 350 million yuan," Cheng said.

Chalco's prices for 2008 term contracts are set at 3,148 yuan per tonne based on yesterday's closing price of the Shanghai June contract.

Spot prices of the raw material for the production of primary aluminum, have fallen more than 20 percent this year to around 3,500 yuan a tonne in China, hit by increased production from Chinese refineries, including Chalco's.

Mainland alumina production rose 19 percent on the year to 7.2 million tonnes in the first four months of this year. REUTERS